Get Your Millennials Off Your Payroll

Newsroom

David Geibel, a managing director at Girard Partners, a Univest Wealth Management Firm, was featured in Forbes

May 8, 2017 By Kerrie Zane, Forbes Contributor

As I hand over another hundred-dollar bill to each of my twenty-something daughters, I wonder, am I enabling or supporting them? And am I the only Gen-X parent consistently shelling out for health insurance, car insurance, cellphones and general overhead? I posed the question to the masses. The resounding response is “No." I am not alone. We are a generation of enablers.

For boomers and Gen-X parents, our default financial behavior has been to assist our adult children. "It is largely because they are facing increased living costs, a volatile job market and sizable student loans," says Shelly-Ann Eweka, >TIAA Financial Advisor. I felt it. My eldest daughter, like many young adults, chose to move home with me for two years following college graduation. She had student loans to repay and credit card debt due to the ritualistic post-graduation European vacation. While living with me lessened her financial burden, it heightened my household costs.

Becoming less fiscally responsible for our grown children takes a conscientious effort. Ease them into the transition by making a list of all items in which you’ve been financially responsible. Put a schedule together and set a path for how they are going to transition to start paying their own way. Useful tools such as Quicken or Mint will help guide you. "If a grown adult child is living in your home, charge them rent and household expenses. Everything has a cost, and they need to understand that," says Dave Geibel, senior vice president and managing director at Univest Wealth Management.

Magdalena Johndrow, a financial advisor with Farmington River Financial Group, suggested that once your young adults are on their own have them employ the 60% solution budget-building approach to help them stay in the black. This plan aims to keep committed expenses at or below 60% of their gross income. "It will help kids come out ahead at the end of the month," she says. Although numbers might be a bit higher or lower, 60% is a feasible goal and a good place to start.

Sit with your millennial and help them determine 60% of their gross monthly salary. Then, add up all the fixed monthly expenses — rent, utilities, student loans, taxes, food, metro pass or gas, etc. These fixed costs should be covered by 60% of their monthly salary. The remaining 40% of income should be allocated to four buckets: 1) retirement account; 2) emergency fund, which is 3 to 6 months’ worth of living expenses; 3) long-term purchases; and 4) monthly “fun money.”

“Remember, small changes go a long way. Let’s say you buy a $5 latte daily. If you cut your latte-habit in half, you could save roughly $913 per year. If you invested the money you saved each year, after 40 years, your money could grow to approximately $275,275, assuming annual compounding and a 8% annual rate of return,” says Johndrow.

One final tip to set your millennials on the path to, not just financial freedom but intelligent investing and portfolio building, comes from Avi Lele, the CEO of Stockpile. Stockpile is an easy and affordable investment platform that makes stock and ETFs accessible to everyone. Available online or via smartphone, stock can be purchased in affordable denominations (as low as $1) through offering fractional shares.

Investments offered by Girard Partners, a Univest Wealth Management Firm, are not FDIC insured, are not a deposit of or bank guaranteed, and are subject to risks, including loss of principal amount invested.